Quiet end to week in Asia as HK back to green, US East coast strike ends, for now

Asia Market Update: Quiet end to week in Asia as HK back to green, US East Coast strike ends, for now; Focus on US Sept NFP and geopolitical weekend risk.

General trend

- Hang Seng looked to be heading lower for a second day running, but by the afternoon had turned around to be up by more than 2%. Markets elsewhere mixed amid light trading ahead of US Sept Non-farm Payrolls tonight and potential geopolitical risk for positions over the weekend.

- The troublesome US East Coast port strike came to a sudden end – for now – as the Dockworkers Union agreed to suspend their first strike since 1977 until Jan 25th, 2025. The Union says it seeks time to negotiate a new contract after the USMX port operators alliance offered a 62% raise to end the strike (not far from the 77% wage increase demanded by the union). Workers will be back on the job Friday. The union said it will continue to negotiate outstanding issues through the January 25th deadline. Within a few minutes of the strike resolution US Fed 50bps cut probabilities fell to 31.1% v 35.2% prior. ZIM (Integrated Shipping Services) was the biggest initial loser in the US, -7% after hours.

- In Japan global shippers Nippon Yusen -9%, Kawasaki Kisen -11%, Mitsui OSK -7% on very high trading volumes (OSK and Kawasaki 4X their 20 day average.

- Potential weakness for EU and US shippers when those markets open.

- Weak numbers out of Australia today: 1) Aug Household Spending much weaker than expected, with the Stats Agency noting that growth in household spending has stalled at the start of the financial year, even as the Federal government’s Stage 3 tax cuts came into effect on July 1st. (However, recall that Australia Aug Retail Sales last week were hotter than expected); 2) Overall Aug Home Loans data was also weaker than expected.

- Since falling as low as 6.97 late last week (lowest in 16 months), USD/CNH has risen back to the 7.06 handle as the China stimulus measures are digested and with no PBOC Yuan fix since Oct 1st.

- China chipmakers Hua Hong and SMIC up >20% in Hong Kong. Reminder last week that China urged local companies to stay away from Nvidia's AI chips.

- Geopolitical uncertainty risk ahead of weekend; Continued strikes by Israel on Lebanon, but no action against Iran yet.

- US equity FUTs +0.1% during the Asia session.

Looking ahead (Asian time zone)

- Fri Oct 4th (Fri night US Sept NFP).

Holidays in Asia this week

- Tue Oct 1st China, Hong Kong, South Korea (one-off holiday).

- Wed Oct 2nd China, India.

- Thu Oct 3rd China, South Korea.

- Fri Oct 4th China (To reopen Tue Oct 8th).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 8,186.

- Australia Aug Household Spending M/M: 0.0% v 0.5%e; Y/Y: 1.7% v 2.9%e.

- Australia Aug Home Loans Value M/M: 1.0% v 1.0%e.

- Australia sells A$700M v A$700M indicated in 2.75% Nov 2027 bonds; Avg Yield: 3.5782% v 3.4714 prior ; bid-to-cover 4.47x v 2.87x prior.

- New Zealand RBNZ: Aug New Lending NZ$11.7B, -3.9% m/m.

- New Zealand Aug Filled Jobs M/M: +0.2% v -0.2% prior (revised lower).

China/Hong Kong

- Hang Seng opens -0.4% at 22,015; Shanghai Composite closed for holidays Oct 1st through Oct 7th.

- Hong Kong Sept PMI (whole economy): 50.0 v 49.4 prior (1st expansion in 5 months).

- Reportedly Germany will vote against EU tariffs on Chinese EVs – press.

- HSBC analysts: China is likely to roll out additional CNY1T fiscal stimulus as soon as after national holiday ends next week; While recent policy moves have boosted sentiment, the missing element is fiscal stimulus [overnight update].

- Jia Kang [former head of MOF affiliated research institute] said China has space to issue up to CNY10T in special bonds to increase fiscal stimulus – US financial press [overnight update].

- Hong Kong Aug Retail Sales Volume Y/Y: -11.8% v -10.1%e; Retail Sales Value Y/Y: -10.1% v -9.0%e [overnight update].

Japan

- Nikkei 225 opens +0.1% at 38,594.

- Ex-BOJ board member Masai: BOJ will keep seeking timing for interest rate hike - Japan press.

- Berkshire Hathaway said to be sounding out investors for 7-part Yen bond - financial press.

- Seven & i said to be approaching buyers for Ito-Yokodo, Supermarket units; Narrowing business focus.

- Japan Fin Min Kato: Specifies economic package to focus on price relief, growth, among others.

- Japan Economic Revitalization Min Akazawa: Will carefully consider the situation on gas subsidies - press.

- IBM Co said to be looking at investment into Japan chipmaker Rapidus - Japanese press.

- Japan new Economic Revitalization Min Akazawa: BOJ should Not pour cold water on economy at wrong time; Should leave monetary policy methods to BOJ; Japan govt and BOJ to closely cooperate to beat inflation.

- Japan sells ¥4.6T vs. ¥4.6T indicated in 3-Month Bills; Avg Yield: 0.0073% v 0.0498% prior; bid- to-cover: 3.42x v 2.71x prior.

- Japan Fin Min Kato: FX should move stable and reflect fundamentals; Confirm Govt and BOJ continue to work closely in line with joint accord [overnight update].

Korea

- Kospi reopens flat at 2,563 (post-holiday yesterday).

Other Asia

- Philippines CPI M/M: -0.2% v 0.3%e; Y/Y: 1.9% v 2.5%e.

North America

- *US EAST/GULF COAST PORTS STRIKE: DOCKWORKERS UNION AGREES TO SUSPEND STRIKE UNTIL JAN 15TH 2025; SEEKS TIME TO NEGOTIATE NEW CONTRACT - US PRESS.

- US East/Gulf Coast ports strike: Dockworkers Union said to seek 77% wage increase to end strike – WSJ.

- Barnes Group: Apollo Global Management said to be in talks to acquire Barnes Group at likely >$45.00/shr - financial press, citing sources.

- (US) Sept Challenger Job Cuts: 72.8K v 75.9K prior Y/Y: 53.4% v 1.0% prior.

- (US) INITIAL JOBLESS CLAIMS: 225K V 221KE; CONTINUING CLAIMS: 1.826M V 1.830ME.

-(CA) Canada Sept Services PMI: 46.4 v 47.8 prior (4th straight contraction).

-(US) SEPT S&P FINAL SERVICES PMI: 55.2 V 55.4E (Confirms 20th month of expansion).

- (US) SEPT ISM SERVICES INDEX: 54.9 V 51.7E (~1.5-yrs high); Prices Paid: 59.4 v 56.0e (highest since Jan); New Orders increase more than 6ppts m/m, but Employment Index contracted for the first time in three months.

- (US) AUG FACTORY ORDERS: -0.2% V +0.1%E.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +55 BCF VS. +56 BCF TO +58 BCF INDICATED RANGE.

- (IR) Pres Biden says have discussed potential for Israeli strike on Iran oil facilities - press.

- (US) Fed's Bostic (hawk, voter for 2024; non-voter for 2025): Natural unemployment rate has shifted, could be lower - speech text.

- (US) Fed's Goolsbee (non-voter for 2024; voter for 2025): 25bps v 50bps not as important as getting rates down over next 12 months by a lot to get to neutral - press. interview

Europe

- (EU) European Union reportedly sues Spain, Portugal, Poland and Cyprus for not taking over directives on taxation of large companies - press.

- (LY) Libya Oil Min: To restart domestic oil production on Thursday, Oct 3rd.

- (TR) Turkey Central Bank (CBRT) Gov Karahan: Macro indicators coherent with disinflation; to continue using sterilization tools - Parliament comments.

- (PL) Poland Central Bank Gov Glapinski: March 2025 projections may show Polish CPI falling; Rate cut could come in March or April or earlier - post rate decision press conference.

- (EU) Reportedly Germany will vote against EU tariffs on Chinese EVs - press.

Levels as of 01:20 ET

- Nikkei 225 +0.2%, ASX 200 -0.7%, Hang Seng +2.4%; Shanghai Composite closed; Kospi +0.6%.

- Equity S&P500 Futures: +0.1%; Nasdaq100 +0.1%, Dax +0.2%; FTSE100 flat.

- EUR 1.1025-1.1040; JPY 146.16-147.94; AUD 0.6840-0.6853; NZD 0.6207-0.6207.

- Gold +0.2% at $2,685/oz; Crude Oil -0.1% at $73.67/brl; Copper +0.5% at $4.5690/lb.